A major North Sea oil project has been halted just a week after Shell pulled out of the development.
The development of the Cambo oilfield will be put on hold, according to the boss of Scottish energy firm Siccar Point, which holds a 70pc stake.
Jonathan Roger said the decision by Shell – which owns the remaining 30pc – to withdraw from the project meant it would be put “on hold in the short-term”, though it said discussions with the oil giant were ongoing.
The Cambo project has been subject to criticism from environmental activists, who say new fossil fuel projects clash with the UK’s net zero strategy.
Ovo Energy boss casts doubts over Bulb bailout
The boss of Ovo Energy has cast doubts over the Government’s decision to temporarily nationalise rival Bulb, adding to mounting criticism of the handling of the energy crisis.
Ministers last month appointed a special administrator for Bulb, rescuing it from collapse at a cost of £1.7bn to taxpayers. Industry officials have since questioned the move, saying cheaper options were available.
Stephen Fitzpatrick, chief executive of Ovo – which is the UK’s second largest supplier – told Bloomberg: “It’s a bit of a mystery. There were very workable solutions on the table.”
A surge in wholesale gas prices has pushed more than two dozen energy suppliers out of business in recent months.
Some suppliers have blamed the energy price cap for the collapses, while regulator Ofgem is now also under pressure to account for its role in the crisis.
Anglo American to pump another £530m into fertiliser mine
Anglo American has said it will invest a further $700m (£530m) into its Woodsmith fertiliser miner, though said it needed more time how to develop it.
The FTSE 100 group snapped up the project in Teesside in 2020 as previous developer Sirius Minerals teetered on the brink of collapse.
Since then, Anglo has slowed development and instead been reviewing the project to determine the final design, cost and time frame.
In an update today Anglo said it will pump more money in and aims to complete work on the budget, schedule and design by the end of next year.
Mark Cutifani, chief executive of Anglo American, said:
We are very happy with the high quality and exciting potential of Woodsmith, with the scale and quality of the polyhalite orebody pointing to a first-quarter operating cost position and strong margins.
This is a very long-life asset and we are going to take the necessary time to get every aspect of the design right to match our long term vision and value aspirations.
Bosses challenge Boris Johnson’s home working plea
ICYMI – Simon Foy reports on the businesses that plan to keep their offices open despite new Covid curbs.
Major employers have vowed to keep their offices open to staff and continue with face to face meetings as a City backlash mounts against Boris Johnson’s work from home guidance.
PwC, KPMG, JP Morgan and Deutsche Bank are among businesses that do not intend to close their buildings down, despite the Prime Minister’s recommendation that staff should work remotely where possible to limit the spread of the omicron Covid variant.
Kevin Ellis, the chairman of PwC, said the benefits of in-person meetings cannot be replicated at home, particularly at what is a busy time for deals.
Meanwhile lawyers said they had been inundated with requests for guidance from companies seeking to work around the rules, and corporate lobby groups used a call with Kwasi Kwarteng, the Business Secretary, to demand clarity over how long restrictions are to last.
A source close to PwC, which employs about 22,000 people in the UK, said its premises will remain open for “essential purposes”. Managers are asking employees to use “personal judgment” as some work is more effective in the office. Staff will have to liaise with their team leaders to determine what activities are deemed essential, the source added.
UK inflation expectations climb
Inflation expectations have surged to their highest level since August 2019 as price rises continue to filter through to consumers.
The 12-month median expectation rose to 3.2pc in November from 2.7pc in August, according to the latest Bank of England figures.
The 0.5 percentage point increase is the largest since 2016.
For the following 12 months, expectations rose to 2.4pc from 2.2pc, while the five-year forecast climbed to 0.1 percentage point to 3pc.
While fresh curbs to stem the spread of the omicron variant have dampened expectations of a Bank interest rate rise next week, 60pc of respondents said they expect rates to rise over the next year. That’s the most since 2017.
Gas prices extend gains on supply fears
Natural gas prices have pushed higher this morning, extending weekly gains amid continued fears over a winter supply crisis.
While shipments from suppliers including Russia remain stable, there’s little extra gas being pumped to help top up quickly depleting inventories.
European storage sites are currently only 64pc full – a level more typically seen in January.
Benchmark Dutch prices rose 0.7pc and are on track for a sixth straight week of gains – the longest run of weekly advances since the record price surge in October. The UK equivalent pushed up 2.3pc.
Elon Musk jokes about becoming an influencer as he sells more Tesla shares
Another day, another Twitter outing for Elon Musk, who paired a disclosure on more Tesla share sales with a joke tweet about quitting his jobs.
The world’s richest person offloaded another $936m (£730m) worth of shares, taking his total disposals to about $11.8bn in stock over five weeks.
He’s about two-thirds of the way through selling 10pc of his stake – a move made after he polled his social media followers on the matter.
A few hours later, Mr Musk took to Twitter to quip he’d found a new calling.
He wrote: “Thinking of quitting my jobs & becoming an influencer full-time,” before asking his 66m followers what they thought of the idea.
Pound nears 2021 low on GDP hit
Sterling has slid to within touching distance of its 2021 low as lacklustre economic growth figures compounded expectations that the Bank of England will hold back on raising interest rates.
The UK economy grew by just 0.1pc in October – meaning it’s still 0.5pc smaller than in February 2020 – in a worrying sign that growth was faltering even before the emergence of the omicron variant.
The disappointing figures will fuel dovish expectations for the Bank of England interest rate decision next week. Traders had already been pushing back bets of a rate hike to February amid the spread of the new strain and tighter Covid rules.
The pound fell 0.1pc to $1.3200, not far from Wednesday’s 2021 low of $1.3162. Against the euro it was flat at 85.43p.
Expert reaction: Further economic support may be needed
James Smith, research director at the Resolution Foundation, says disappointing GDP growth has dashed hopes this would all be over by Christmas.
Heathrow warns omicron will hammer travel rebound
Heathrow has issued a bleak outlook this morning, saying passenger numbers are likely to reach barely half of pre-Covid levels next year as the pandemic continues to hammer travel.
The airport said passenger numbers are likely to reach 45m in 2022. That compares to a record 81m in 2019, when it ranked as Europe’s busiest hub.
The travel sector’s fragile recovery suffered a fresh setback with the reintroduction of travel curbs and testing regimes to stem the spread of the omicron variant.
Heathrow said it’s seen high levels of cancellation among business travellers concerned about getting stuck overseas.
Traffic in November fell 60pc from pre-pandemic levels despite the reopening of the US travel corridor – a move that was hailed as a major step forward in the recovery.
The airport warned international travel won’t reach 2019 levels until all restrictions are removed and passengers are satisfied there’s no risk of new curbs being imposed – something it said was “likely to be several years away”.
FTSE risers and fallers
The FTSE 100 has dropped for its third straight session, with investors rattled by GDP figures showing economic growth was stalling even before the omicron variant hit.
The blue-chip index is down 0.2pc after new data showed the economy grew just 0.1pc in October – well below expectations.
Oil majors fell on lower crude prices, with Shell dropping as much as 0.7pc ahead of shareholder vote to approve a plan to get rid of the oil and gas company’s dual share structure and move its headquarters to London from The Hague.
Base metal miners capped some of the losses on the commodity-heavy FTSE 100 index, helped by low inventories and monetary policy easing by top consumer China.
Primark owner ABF gained 0.5pc following a bullish update on shopper numbers.
The FTSE 250 fell 0.3pc, with asset manager Ashmore leading losses after a downgrade by Goldman Sachs.
Primark enjoys shopper boost despite omicron
Primark has said it’s still attracting floods of shoppers at its stores despite the emergence of the omicron variant and stricter mask-wearing rules.
Associated British Foods, which owns the discount fashion chain, said it hasn’t seen any drop in footfall, with sales and margin growth ahead of expectations at the start of the financial year.
The company said it had managed to use its position as a major customer for its suppliers to overcome some of the squeezes on global supply chains, so has most of the products it needs for Christmas.
While tougher restrictions have had an impact on trading at its stores in the Netherlands, Germany and Austria, the Primark owner remained bullish on the outlook, saying sales between December and April would be “significantly better” than last year.
Shares rose 0.6pc following the update.
Octopus secures £227m cash boost for green energy push
Octopus Energy has secured a $300m (£227m) investment to help fund the transition away from fossil fuels, marking a major boost for the company amid an escalating energy crisis.
The British firm, which offers green electricity services to over 3m domestic customers, has received the backing from the Canada Pension Plan Investment Board.
It follows a $600m investment from Al Gore’s Generation Investment Management and takes Octopus’ valuation to around $5bn.
Greg Jackson, chief executive of Octopus Energy, said:
Innovating new ways to accelerate investment into the renewable energy revolution is vital to delivering governments’ net zero goals and the CPP Investments-Octopus partnership is globally significant, paving the way to billions of dollars of investment in the UK and globally. Make no mistake – this partnership is huge.
Bank of England set to hold fire on rate rise
Here’s some more from my colleague Louis Ashworth on expectations for the Bank of England meeting next week:
The Bank of England is expected to back away from an interest rate rise this month despite surging inflation, as fears grow that “Plan B” restrictions will spark an economic slowdown.
Economists are predicting that the Bank’s Monetary Policy Committee (MPC) will take no action when it meets on Thursday because of concerns that an increase would pile further pressure on the economy in the wake of new rules to tackle the omicron variant.
Traders have also cut their bets on a rise, with foreign exchange positioning implying a 36pc chance of an increase in rates from their current all-time low of 0.1pc.
It comes after inflation spiked to 4.2pc in October, its highest level in a decade, and the Bank’s deputy governor Ben Broadbent said that price rises are likely to climb “comfortably” above 5pc next year. The Bank’s target is 2pc.
Out of nine economists to issue updated forecasts in the wake of the new restrictions, just two expect the MPC will increase the Bank Rate to 0.25pc this month.
FTSE 100 slumps
The FTSE 100 has slumped at the open after new figures showed sluggish economic growth in October.
The blue-chip index dropped 0.3pc to 7,298 points.
What will this mean for the Bank of England?
Dean Turner at UBS says the GDP number will give the Bank of England “further cause for hesitation ahead of the interest rate setting meeting next week”.
In our view, renewed restrictions will not have a material impact on the economy, so we expect policymakers to stick with their hawkish tone, highlighting the need for rate rises at some point.
However, notwithstanding the current inflation backdrop, it is increasingly likely that the Bank of England will err on the side of caution next week and leave rates on hold. Looking ahead, and assuming the labour market remains strong, a hike could be on the cards as early as February.
Yael Selfin, chief economist at KPMG, also thinks the Bank will hold rates, but reckons omicron and inflation are the bigger deciding factors.
Today’s release is unlikely to provide a material shift to the Bank of England’s decision next week, where the key consideration will be the effect of the omicron variant on growth and inflation heading into the new year.
Given the uncertainty around the shape and evolution of the government’s restrictions and their impact on household spending, we expect the MPC to unanimously hold off raising rates until February.
IoD: NHS activity keeps contraction at bay
Kitty Ussher, chief economist at the Institute of Directors, said:
Economic growth would have fallen in October if it were not for the return of face-to-face appointments in the NHS and the ramping up of vaccination activity, both of which had a noticeable positive impact on the service sector.
Underneath this, manufacturing output was flat, with evidence coming through that while demand remains strong, production is being hampered by difficulties sourcing supplies.
Meanwhile consumers, who had enjoyed the opening of hospitality venues in the late summer, in October switched back to shopping – and booking holidays.
Looking forwards, we expect a strong showing for the retail sector over Christmas, but hampered by concerns over travel and hospitality as we get to grips with the implications of the omicron variant on consumer demand.
Rishi Sunak: We said there could be bumps in the road
Chancellor Rishi Sunak insists the UK economy is still in track, despite October’s sluggish growth.
We’ve always acknowledged there could be bumps on our road to recovery, but the early actions we have taken, our ongoing £400bn economic support package and our vaccine programme mean we are well placed to keep our economy on track.
We have still been recovering quicker than expected, with more employees on payrolls than ever before and redundancies remaining low.
Expert reaction: Health sector props up economy
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, points out that sharp growth in the health sector is doing a lot of the heavy lifting in October’s GDP figures.
He adds: “Many firms were struggling even pre-omicron.”
Expert reaction: Plan B could spark contraction
Paul Dales, chief UK economist at Capital Economics, said:
The disappointing 0.1pc month on month rise in GDP in October suggests that the economy had slowed to a crawl even before the omicron Covid-19 variant was discovered in late November.
Early evidence suggests growth in November might have been a bit better. Nonetheless, at such low rates of growth, the government’s “Plan B” Covid-19 restrictions could be the difference between the economy growing or contracting in December […]
We estimate that the “Plan B” Covid restrictions may reduce GDP by 0.0-0.5pc in December. That means it is touch-and-go whether the economy will grow or contract this month. Against that background, we doubt the Bank of England will raise interest rates next Thursday.
Grant Fitzner, ONS chief economist, said:
While GDP growth slowed in October the UK health sector again grew strongly while second-hand car sales and employment agencies also boosted the economy.
Taken as a whole, the dominant services sector reached its pre-pandemic level for the first time in 20 months.
These gains were offset by a drop in restaurants, which fell back after a strong summer, and reduced oil extraction and gas use.
Construction also saw its biggest drop since April last year, with notable falls in housebuilding and infrastructure work, partly driven by shortages in raw materials.
Supply troubles weigh
The lacklustre GDP figures will come as a major blow to hopes for the post-pandemic recovery.
A breakdown by sector shows the services sector bounced back strongly, albeit with a slight easing off for restaurants after the summer boom.
But supply chain troubles were the real issue, with material shortages hampering output for housebuilder and infrastructure work in particular.
GDP growth slows to a crawl
We start the day with some rather disappointing data showing the the UK economy grew by only 0.1pc in October.
That’s well below forecasts of 0.4pc and means the economy is still 0.5pc smaller than it was in February 2020, just before the pandemic hit.
The figures mark the period before the emergence of omicron, with the services sector still booming after reopening.
But the ONS pointed to supply chain troubles as the biggest drag, with manufacturing flat and construction output falling.
5 things to start your day
1) Business must convince Treasury they need more help, says Kwasi Kwarteng January could reach ‘pinch point’ if Plan B drags on past Christmas, but Rishi Sunk has no plans to revive furlough scheme
2) New Covid curbs will force Tube bailout, says Sadiq Khan The mayor of London blames Boris Johnson for wrecking the finances of TfL
3) Germany’s Siemens drops HS2 legal challenge to target £500m signalling contract Court documents claimed that Hitachi and Alstom’s subsidiary, Bombardier, had failed to meet some technical requirements
4) UK’s biggest rail operator Go-Ahead to suspend shares after ‘serious errors’ in accounts A Labour MP has called for the former FTSE 250 company bosses to hand back their bonuses
5) Rishi Sunak’s tax cut plans wrecked by omicron restrictions, experts warn Institute for Fiscal Studies says that Boris Johnson’s hastily imposed rules will hit growth and make tax cuts difficult to implement
What happened overnight
Asian markets opened mostly lower on Friday, following a weak lead from Wall Street and as investors awaited a key US inflation report due later in the day.
Hong Kong’s Hang Seng Index was down 0.27 percent to 24,188.24 while Tokyo’s benchmark Nikkei 225 index fell 0.57 percent.
Shanghai also slipped, while Seoul, Taipei, Singapore and Wellington were all down slightly, as was Singapore.
Investors were also concerned about the debt crisis in China’s property sector, with two major Chinese property firms defaulting on $1.6 billion worth of bonds to overseas creditors.